FLP opposes new FEA deposit rates

  • 14th October 2011
  • 2011
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FEA should first furnish an account of all moneys collected since 1966 as security deposit before it can raise the deposit rate, says the Fiji Labour Party.

Letters have been sent to the Authority as well as to the Minister for Energy, Timoci Natuva, opposing FEA’s decision to increase the rate for the security deposits and asking that it be rescinded.

“The issue of FEA’s demand for enhanced deposits must be assessed against its treatment (usage) of the deposits. If it is established that the Authority misused it by allocating these deposits to its operating expenditure, then it is quite clear that it is abusing the requirement for the security deposit and should be held accountable for its actions,” FLP Leader Mahendra Chaudhry said in his letter to the Minister.

Furthermore, the FLP is concerned that FEA keeps raising electricity charges in one guise or the other in these troubled economic times when the ordinary consumer is already struggling to survive faced with escalating costs of living.

“Electricity rates are now quite excessive and indeed oppressive for the poor. Actual rates in the past six years have risen by almost 60% with an additional 30% surcharge on fuel. Last year alone (June), a massive 34% hike was imposed on domestic tariff. Along with other tariff restructuring that took place, this almost doubled electricity rates for all high-end domestic consumers.

“The ‘restructuring’ provided FEA an excuse to bring in other manipulative measures to increase revenue. The lifeline threshold was lowered from 250kWh per month to 130kWh pushing close to 100,000 poor and lower income households into the high-end domestic user bracket. At the same time, FEA changed the basis of its bill calculation from actual usage to a fictional average daily usage,” Mr Chaudhry said.

Under the circumstances, the current hike is both harsh and insensitive given the mounting social distress in the country.

“It is the duty of any responsible government to ensure that the cost of utilities remains affordable and within the reach of the ordinary income earner. FEA should not forget that it is not just a commercial entity required to show good profit, it is the provider of an essential service with social responsibilities to the citizens of Fiji,” Mr Chaudhry said.

FLP’s letter to FEA is reproduced hereunder:

11 October 2011

Mr Hasmukh Patel
Chief Executive
Fiji Electricity Authority
2 Marlow Street
Suva

Dear Mr Patel

re: Review of Consumer Security Deposit – Act No. 2016210114

I refer to a letter from the FEA dated 24 September 2011 notifying us of an increase in the required security deposit from the current $80 to $133.57. We are now asked to pay an extra $53.57 to comply with FEA’s increased security deposit requirement.

I am aware of the extent of discontent this has caused consumers at a time of economic stagnation when most families are facing extreme financial hardship. It will simply add to the burden they already carry.

FEA’s annual report 2010 shows that the Authority collected close to $2 million ($1.847m) in prepayments and deposits for the year, an increase on the $1.8m collected in 2009. This is a substantial amount raising some relevant questions:

  • What is the total accumulated amount collected/held in security deposits to end of last year?

  • Where is this money kept? Is it in a separate account or is it being used for FEA’s operating expenses?

As far as we are aware, FEA has not so far given an account of the moneys it has collected over the years (since 1966) as security deposit. Last year alone it collected close to $2 million and, based on this, it would be correct to assume that a huge sum running into several millions must by now have accumulated in this security deposit fund.

This money does not belong to FEA but is held by them as a deposit on behalf of consumers. As such, FEA should account for these moneys, which should have been kept in a separate fund, on an annual basis. This it has not done as far as we can ascertain.

In the circumstances, it would be a perfectly legitimate demand of the consumer(s) that FEA first publish an account of all the moneys collected as deposit and how these have been treated over the years.

The issue of FEA’s demand for enhanced deposits must be assessed against its treatment (usage) of the deposits. If it is established that the Authority misused it by allocating these deposits to its operating expenditure, then it is quite clear that it is abusing the requirement for the security deposit and should be held accountable for its actions.

Furthermore, why are people who have not defaulted on their electricity bill payments, being lumped with this additional hike? Higher security deposits may be justified in the case of persistent defaulters whose accounts run into arrears. There would hardly be any objections should such consumers be targeted. But to penalize everyone at a time of widespread financial hardship faced by working families with ordinary incomes, is nothing short of irresponsible exercise of corporate power.

Electricity rates are now quite excessive and indeed oppressive for the poor. Actual rates in the past six years have risen by almost 60% with an additional 30% surcharge on fuel. Last year alone (June), a massive 34% hike was imposed on domestic tariff. Along with other tariff restructuring that took place, this almost doubled electricity rates for all high-end domestic consumers.

The ‘restructuring’ provided FEA an excuse to bring in other manipulative measures to increase revenue. The lifeline threshold was lowered from 250kWh per month to 130kWh pushing close to 100,000 poor and lower income households into the high-end domestic user bracket. At the same time, FEA changed the basis of its bill calculation from actual usage to a fictional average daily usage.

Having thus inflated the tariff rate and brought 100,000 more households into its tariff net, FEA then announced, almost simultaneously, that it was going to review the security deposit to reflect these increases, in line with the requirements of the Electricity Act. Instead of the standard $80 it was collecting so far, security deposits will now be equivalent to the average cost of two months of usage per household.

This is not only insensitive in light of the hardships people are already facing from the crippling effects of rising cost of living, it is also unethical corporate practice. It seems FEA intends using the millions raised from security deposits as a ready source of cash to meet its operating expenses and debt repayments.

We remind you that increasing the charge for security deposits will not only inflict greater hardship on ordinary families, it will also unduly increase the cost of doing business for people in the commercial and industrial sectors. This will have further inflationary impact on consumer prices.

Also a word of caution may be timely. If FEA keeps raising the tariff as it has been doing, it could very well price itself out of the market. Higher tariff is discouraging usage, forcing people to either cut back or resort to alternative sources of energy. FEA needs to be able to strike a balance between what is punitive and what will be permissive.

We call on FEA as a responsible corporate entity owned by the people of Fiji, not to take advantage of the current political situation to unilaterally impose such insensitive policies on our people. If the Authority needs to be bailed out financially, it should turn to the State for help, not keep placing inordinate burden on the consumers.

We write this letter not for our own sake but for the thousands of poor families who are struggling to survive in an environment of escalating poverty.

It would be a humane gesture on the part of FEA to abandon its plan to extract its pound of flesh from its already bleeding consumers.

We look forward to your Board’s proper understanding of this critical situation.

Mahendra P. Chaudhry
Leader FLP/NFU